One of the nice young men who does the Planet Money podcast on the NPR somehow lured Edward Conard, who you might remember as the guy who created a shell corporation that existed only to donate $1 million to Mitt Romney’s SuperPAC, out to a plebeian coffee shop to talk about rich people. As a rich person-American, Edward Conard is very upset — more disappointed than angry, really — at some of the rhetoric coming from the poors, who don’t understand that rich people getting richer is good for everyone. He talked at great length, at this coffee shop meeting! Then our NPR gotcha journalist wrote it all up over six pages, each of which you will click on to generate rage-ad-pageviews for the New York Times, you jealous little liberal.
What does Conard blame the 2008 financial collapse on? It was your fault, because you wanted the money you had deposited in the bank back.
The financial crisis, he writes, was not the result of corrupt bankers selling dodgy financial products. It was a simple, old-fashioned run on the banks, whom, he says, were just doing their job. There are a huge number of people in our economy who want ready access to their savings — pension-fund managers, insurance companies and you and me with our bank accounts. And because economic growth comes from long-term investments in things like housing, factories and research, the central role of banks, Conard says, is to turn the short-term assets of nervous savers into risky long-term loans that help the economy grow.
Every once in a while, this system breaks down. For one reason or another, the savers panic and demand all their money back. This causes a massive problem because the money isn’t sitting at the bank; it’s out in the world in the form of long-term loans. “A lot of people don’t realize that what happened in 2008 was nearly identical to what happened in 1929,” he says. “Depositors ran to the bank to withdraw their money only to discover, like the citizens of Bedford Falls” — referring to the movie “It’s a Wonderful Life” — “that there was no money in the vault. All that money had been lent.”
Yes, you see, the banks were simply terribly, terribly over-leveraged! Surely they can’t be blamed for that, can they? And here’s an area where big government can help!
Conard concedes that the banks made some mistakes, but the important thing now, he says, is to provide them even stronger government support. He advocates creating a new government program that guarantees to bail out the banks if they ever face another run.
Sure, yes, banks should never suffer any consequences for their actions but also shouldn’t be subject to regulations of any kind, makes sense. But this doesn’t answer the real question, which is: why should capital gains taxes be eliminated?
Society benefits if the successful risk takers get a lot of money. For proof, he looks to the market. At a nearby table we saw three young people with plaid shirts and floppy hair. For all we know, they may have been plotting the next generation’s Twitter, but Conard felt sure they were merely lounging on the sidelines. “What are they doing, sitting here, having a coffee at 2:30?” he asked. “I’m sure those guys are college-educated.” Conard, who occasionally flashed a mean streak during our talks, started calling the group “art-history majors,” his derisive term for pretty much anyone who was lucky enough to be born with the talent and opportunity to join the risk-taking, innovation-hunting mechanism but who chose instead a less competitive life.
Oh, god, filthy hippies! The bane of human existence! What can possibly get rid of them? The elimination of capital gains taxes? YES. (Also, lawyers.)
In Conard’s mind, this includes, surprisingly, people like lawyers, who opt for stable professions that don’t maximize their wealth-creating potential. He said the only way to persuade these “art-history majors” to join the fiercely competitive economic mechanism is to tempt them with extraordinary payoffs.
It’s just … look, we need as many of these flop-hairs in the game as possible, right? Your typical art history major loves hanging out in coffee shops, rapping about abstract expressionism or whatever. He knows that if he decided to get a job working long hours at a hedge fund like Edward Conard did, he could only make millions and millions of dollars and retire at the age of 50 into a life of total ease and comfort. That doesn’t attract him. But what if we tilted the playing field just a little bit and instead made it possible for him to earn millions and millions and millions of dollars? What then? C’mon, hippie, we’re losing to the Chinese, what will it take?
Anyway, obviously this is going to be Mitt’s Secretary of the Treasury, but here’s the important question for you: Don’t rich people generally have PR flacks who prevent them from talking to the liberal media and saying the exact word-sequences that will most enrage the liberal media’s liberal readers? Discuss. [NYT]